Edinburgh office market volatile after ‘resilient’ Q1

● Report points to ‘significant’ effect on take-up levels ● Occupiers taking wait and see stance during outbreak

The coronavirus pandemic is set to have a “significant effect” on Edinburgh’s office property market for the remainder of 2020 following a “resilient” first quarter.

Analysis from commercial property consultancy Knight Frank shows that just over 124,000 square feet of office space was leased across the capital between January and March, with more than half – 68,915 sq ft – concentrated in the city centre. That city centre figure compares with the 90,661 sq ft recorded during the equivalent period last year.

Despite falling short of the five-year Q1 city centre average (112,976 sq ft), take-up was similar to the 68,946 sq ft recorded in the final three months of 2019.

Finance, banking and insurance firms were the most active sector during the first three months of this year, accounting for 46 per cent of the city centre take-up figure.

The firm said occupiers were now taking a “wait and see” stance as the impact of Covid-19 pans out and expects to see lease re-gearing pick up.

Toby Withall, office agency partner at Knight Frank Edinburgh, said: “While the impact of the coronavirus pandemic will likely have a significant effect on office take-up throughout the remainder of 2020, there was a relatively steady level of activity in Q1. That said, Edinburgh city centre take-up was still lower than average, with the market still recovering from the protracted Brexit process.

“Amid the current backdrop, we’ve seen an ongoing trend for lease re-gears which we expect to continue during the months ahead. In a time of unprecedented challenges, we’re already witnessing a tendency for occupiers to stay put and extend contracts as they ride out the storm, so to speak.

“The situation is ever-changing, which has made engagement and two-way communication between landlords and tenants more important than ever. It’s also encouraging to see that a large portion of live requirements have been paused, rather than shelved completely.”

He added: “Edinburgh is still supporting a busy financial services sector, along with growing tech companies and an active public sector. Activity may be on hold for the time being, but the opportunities have not been completely abandoned.”

The comments came as a report from property adviser Colliers International suggested that a recovery of investment into global real estate is expected to be “sharper and faster” following the Covid-19 outbreak than the period after the global financial crisis.

The firm said that although a global recession was expected there were “glimmers of hope” with the latest China manufacturing purchasing managers’ index (PMI) data showing stabilisation in March following a fall to record low levels in February.